Tata Steel gets PE interest for its South East Asian units

New Delhi, Nov 9: Following on its strategy to refocus its resources in India and divesting overseas assets, Tata Steel is selling its two units in South East Asia – NatSteel Holdings and Tata Steel Thailand. The two units, which will be sold together, have seen interest from multiple players, including private equity companies.
Sources said that the two units could be valued at $500 million.
“Couple of private equity players have shown interest,” an executive said, but added the talks were at an early stage.
While NatSteel Holdings is based in Singapore, Tata Steel Thailand – which was earlier called Millennium Steel – is the largest steelmaker in the country.
“In pursuit of its long-term strategy to create sustainable value for its shareholders, Tata Steel periodically undertakes assessment and review of its portfolio including overseas business,” a Tata Steel spokesperson said.
“Tata Steel will continue to consider all strategic decisions including portfolio restructuring options in a responsible manner taking into account the interests of stakeholders, including employees. However, as there is no firm proposal for consideration current, the company has no further comment to make in the matter,” added the spokesperson.
View from the top
The country’s largest steelmaker had first given a peek to its strategy in July, when during its AGM, Chairman N Chandrasekaran said that Tata Steel is looking to simplify its structure and may sell assets that have not scaled.
Interestingly, Tata Steel’s global ambitions took first steps with the acquisition of NatSteel, in 2004 for about 480 million Singapore Dollars. A year later, the Indian major picked up Millennium Steel for $400 million, which included debts of $225 million.
Two years later, the global expansion would end with the record buy of Corus for $12 billion.
But the overseas expansion hasn’t gone according to the plan. The Corus business, now Tata Steel Europe, is being merged with the steel business of thyssenKrupp, in an attempt to bring stability.
NatSteel and Tata Steel Thailand too haven’t scaled up to expectation. While the operations in the region turned profitable in the last financial year, margins remained low. While net profit of Tata Steel Thailand doubled, that of NatSteel dived by more than half. EBITDA, or earnings before interest, tax, depreciation and amortization, of both the firms fell.
“The two companies haven’t scaled despite attempts. The view is that resources should be concentrated in India, which is among the fast growing steel markets in the world,” said a senior executive from the industry.
Push from Narendran
The plan to sell the two units have got a strong push from Tata Steel CEO and Managing Director TV Narendran.
The Tata Steel veteran was involved in the acquisition of NatSteel Singapore and took over as its President & CEO in 2008. From 2013, he was Managing Director of the operations, both in India and South East Asia. At present, he is the Chairman of the two units.